In a handbag count of the front row yesterday, the first day of London fashion week, one brand came out the clear winner. That fact alone would be cause for celebration for any handbag label, of course, but for Mulberry, dominance at London fashion's top table is just one string to their bow. At an opening night at Hoxton's White Cube gallery, I noticed that, again, Mulberry scored higher attendance than any other handbag brand; a few days later, on an early-morning Heathrow Express, I spotted two more. This is no mean feat, since a typical price tag for a Mulberry handbag is around £600. The Mulberry label is a modern phenomenon, a status symbol that has infiltrated even the art gallery-visiting, liberal broadsheet-reading walks of life who might once have fancied themselves immune to such things.

In the six weeks to 15 January this year, Mulberry's sales were 66% higher than in the same period last year. In the six months to 30 September, the last period for which full figures are available, pre-tax profits at Mulberry jumped by 207%, from £1.5m to £4.7m. And the skies look set fair for 2011: even before the order books closed for spring 2011 collection, the label was reporting a 104% rise in wholesale orders.

The ascendancy of the Mulberry star was made complete one evening in December last year at the British fashion awards, when the industry gathered for a glamorous dinner at the Savoy hotel in London. Mulberry beat Burberry, Pringle of Scotland and Victoria Beckham to win designer brand of the year. That evening, designer Emma Hill and chief executive Godfrey Davis held court at the Mulberry table while an endless stream of buyers, editors, bloggers and industry insiders stopped to offer their congratulations, and to ally themselves with a brand that has what Oscar insiders call The Big Mo: Momentum.

Mulberry was born in a garage in Shepton Mallet, Somerset, in the early 1970s. The founder, Roger Saul, set up the company with £500 he inherited on his 21st birthday. Saul was ousted in a boardroom coup in 2002, a turning point that saw a respected but small-scale company begin to transform into something bigger and glossier. The Somerset connection remains today: around 30% of its bags are made at the Rookery, Mulberry's factory in Somerset, which employs around 200 people.

The "celebrities" of the Mulberry world are the "name" handbags. The satchel-type Alexa bag, named after the TV presenter and best-dressed-list fixture Alexa Chung, was the headline success of 2010; the Bayswater, a kind of hybrid of a traditional English doctor's bag and the chic structure of the classic Hermès designs, has achieved classic status since its appearance in 2002. All Mulberry bags come in different sizes, to appeal to different customers: I have seen tiny, doll-sized Alexa bags on the dancefloors of Paris clubs, and large ones stuffed with spare nappies and colouring pens among the school-run mums in my local cafe. The Bayswater is available in a sensible tan leather with a padded section specifically designed to hold a 13in MacBook for £750; in a metallic tiger print for £868; or in deluxe ostrich skin, decorated with whimsical gunmetal teapots, for £4,085.

"I have a Bayswater, my son's grandmother has a Bayswater, Kate Moss has a Bayswater," is how Hill puts it. Davis makes a similar point, in CEO language: "One of the elements upon which our success as a brand is built is that we have a very wide group of customers."

"Brand DNA" has been the fashion industry's obsession for a decade. The DNA of Mulberry, says Davis, "is as much about craftmanship and style as it is about out and out fashion". The Rookery is one of the last remaining handbag factories of substantial size in England. The company is currently recruiting, and plans to increase the percentage of its bags made there from 30% to 40%.

The Mulberry customer "is buying the bags for their inherent value, and their usability," says Davis. In other words, the emphasis on craftmanship and longevity has helped customers who are not seduced by flip notions of having the "It bag" of-the-moment see the point. "There is an element of sense and purpose about our bags," says Davis. Even the smallest Mulberry clutch comes with a shoulder chain tucked inside, so that it can be converted to a shoulder bag. Those kind of details matter.

Designer handbags have historically been of French or Italian heritage; Mulberry makes a point of celebrating its Englishness. The Mulberry catwalk show tomorrow – at which models wearing the newest Mulberry frocks and coats will be swinging the handbags, the label's cash cow, at nose-height in front of the assembled fashionistas – will be held at Claridge's, all the better to underscore in the minds of international fashion week attendees the links between Mulberry and quintessential Englishness. But what is smart and subtle about Mulberry is that the Britishness it embraces is not a twee, aspic-set version, but one that embraces contradictions and quirks. Mulberry invests its connections and money not just in the shows, but in putting on fashion week parties that have become legendary in the industry as one of the few nights where fashion people actually get drunk and silly. This association with fun and eccentricity has a trickle-down effect to how consumers perceive the bags.

Mulberry will be 40 years old later this year. The boardroom coup which ousted Saul nine years ago was instigated by Christina Ong, the label's largest shareholder. Davis, who had already worked for the company for a decade, took over running the business. "What we wanted to do was take our English style and craftmanship and make that appeal to a broader community, and appeal to a younger consumer than we did then," says Davis. Change was apparent when a catwalk collaboration with Luella Bartley produced the Gisele bag, named after the Brazilian supermodel, which became a huge commercial hit. The Bayswater appeared later that year; the Roxanne – a huge hit in its day, although not one that proved long-lasting – in 2004. Hill became new creative director in 2008, and within a year, had produced the Alexa, which made the biggest splash of any Mulberry bag to date.

Hill, who is 41, began her career at Burberry but spent 15 years in New York, first at Liz Claiborne, before moving to Donna Karan, Calvin Klein, Marc Jacobs and Gap. The two most important things she learned in New York, she says, were "a sense of polish, of being quite obsessive about detail" and "a respect for brands, and an understanding of the need to honour the brand. I learned that at Calvin." During Hill's stint at Calvin Klein, the founder himself was very much in charge, and in the design studio every day. Every time he came into the room, Hill had to hide her lucky Hello Kitty sketching pencil, which was not in accordance with Calvin's clear guidance as to workplace aesthetics. "At Calvin Klein, everything, down to the pencil you used, to what you ate, to the Christmas decorations in the building – everything had gone through his filter. It was fascinating to experience. I learned a lot from that." These days, Hill has brought something of the same modus operandi to Mulberry: "At fashion week, I love seeing everything come together for the show. The canapes, everything. My grandparents were bakers, so I'm at all the food tastings, saying 'this needs more egg …'"

Her switch from Calvin Klein to Marc Jacobs was, she says, an education all of itself. "The two places could not be more different. I had become very 'Calvin' by the time I went to Marc – it was all tied-back blonde hair and high heels. And suddenly I was in an environment that was all colour and fun and experimentation."

Hill's natural state, it seems, is somewhere between the two. Her own style is relaxed, and she says she loves seeing Mulberry bags that are "really beaten up, properly well-used and well-loved". She says she is the kind of designer "who loves the creative aspect, but also gets a huge kick from success. I love seeing the bags out in the real world. I can't separate that from creativity, because what I love doing is making gorgeous things that women want." The task she set herself on arrival at Mulberry was "to connect the dots. To pull it all together. I love brands, and I wanted to make Mulberry more rounded as a brand: to link the ready-to-wear to the bags, to have more fun jewellery, more gifts, so that the brand can live and breathe."

Hill's outside-the-ivory-tower attitude makes for a good relationship with Davis, and this matters to her. "I think most of the really successful brands are the ones where there is a good relationship between the creative director and the CEO", she says. "It always shows." As for Davis, he is thankful to have a designer who is sensitive to commercial considerations. "Our design team don't work in a vacuum. They are very professional, and very good at delivering what we need."

A week after Hill joined Mulberry, the financial markets crashed. "I thought: right, this is going to be a challenge," she recalls. "Because let's face it – nobody really needs a new bag." The one "really conscious thing we did" was to broaden the price points. "Everything was at about the £600 mark. I introduced the Mitzy, which was £395 when we launched it. And then we added some really high-end pieces, to balance that out." According to Davis, "what we never did was compromise on components, or on the quality of production, just in order to hit a certain price point. What underpins our product is quality, and that is more important, not less, in a challenging economic environment."

The engine room of growth now is overseas expansion. "Asia, Europe and the USA," says Davis – in that order. By the autumn, New York will have its own flagship store equal in size to the Bond Street one; by the end of this year, Mulberry will have more stores overseas than it does in the UK. "We are one of the last remaining English luxury brands. We're a little bit odd and quirky, and have sheep wandering about next to the factory," says Hill. "We want to take all that, and turn it into a global business."